Relieved From Duty: Ohio Supreme Court Says Insurer Not Obligated to Defend In Opioid Suits

Opioid epidemic litigation remains at the top of our newsfeeds as complex legal issues and rapidly diverging court rulings continue to…well…get more complex. As drug distributors enter multi-billion-dollar settlement agreements, their insurers are faced with covering costs. Last week, the Ohio Supreme Court sided with Acuity Insurance when it held that commercial general liability policies do not cover claims brought by governmental entities to recover economic losses incurred as a result of the opioid epidemic.

This dispute presented the age-old question: when are insurance companies actually required to pay? Masters Pharmaceutical argued that the terms of its commercial general liability policies require Acuity to defend Masters in lawsuits brought by twenty-two cities and counties in three different states, all of which claim that Masters’s alleged contributions to the opioid epidemic resulted in significant economic costs. The terms of the policies are clear: Acuity is legally obligated to provide coverage for “damages because of bodily injury.” This left the Court to determine whether the entities suffered aggregate economic losses “because of” bodily injury.

The Ohio Supreme Court adopted the reasoning from a recent Delaware ruling and concluded that “[t]he governments in the underlying suits [did] not tie their alleged economic losses to particular bodily injuries sustained by their citizens, but to the aggregate economic injuries they have experienced because of the opioid epidemic.” Rather than seeking to recover the costs of providing medical treatment for individual opioid-related injuries, these twenty-two governmental entities seek to recover “their own increased economic costs resulting from a public health crisis,” in the form of increased expenses of providing public services in excess of normal costs.  The Court reasoned that these types of damages did not have a sufficient nexus to the individuals who actually suffered from opioid addiction so as to have been incurred “because of bodily injury.”  Thus, no coverage.

The lesson to be learned is this: commercial general liability policies such as the Acuity policy do not obligate the insurer to defend the insured against claims brought by governmental entities to recover the entities’ own increased costs associated with the opioid epidemic. Unless the entities seek damages for bodily injury on behalf of their injured citizens, or because of any particular bodily injury sustained by their citizens, such a claim would fall outside the scope of policy coverage.

After a lengthy appellate process, the Court laid to rest only one of two questions­—the Justices in the majority declined to rule on Acuity’s proposition that the loss-in-progress provision within its policies bars coverage because Masters knew of prescription-opioid addiction prior to the policy period. We can rest assured that we will see this question again in future litigation.